800.6176/96a: Telegram

The Secretary of State to the Ambassador in the United Kingdom (Kennedy)

772. The Department is informed that Mr. Viles is proposing action by the International Committee to increase the rate of release of rubber to commercial markets to 65 percent for the fourth quarter.29 You are requested to see that the British Government is given a full understanding of the position of this Government regarding commercial releases, using the following as the basis of note or memorandum.

It is assumed that producers and the International Committee will welcome an opportunity to increase quotas if additional rubber can be sold at reasonable prices. Higher quotas should of course decrease unit costs of production and thus increase profits if prices remain stable.
Releases in excess of the authorized 60 percent will be required to meet estimated commercial requirements in the fourth quarter.
Commercial stocks, particularly in this country, are unusually low. Should additional rubber be available at reasonable prices, there is every reason to believe that it would be taken promptly to build up manufacturers’ stocks, which no doubt would then be maintained at higher levels so long as war or the danger of war continues. This Government would favor considerable expansion of commercial stocks.
With the prospect of protracted warfare, stocks in all consuming markets must be viewed as dangerously low. Producers as well as consumers will be harmed if limitation of export or high prices restrict the opportunity to expand these stocks.
For these reasons, therefore, this Government is strongly of the opinion that the Committee should provide gradually expanding quotas, beginning in the fourth quarter of this year, so that production may be increased as rapidly as practicable.
  1. The percentages mentioned here and in later documents pertain to quotas to be fixed by the International Rubber Committee with reference to basic quotas stated in article 4 of the International Rubber Agreement signed May 7, 1934, as amended by the protocols signed June 27, 1935, May 22, 1936, and February 5, 1937, International Labour Office, Intergovernmental Commodity Control Agreements (Montreal, 1943), pp. 114 ff. The total basic quota for 1939 was 1,519,000 tons and for 1940, 1,541,550 tons.